Simon v. Merritt

Beck, Ch. J. The defendant filed an equitable answer setting np fraud practiced by tbe payee of tbe note upon defendant in order to procure its execution, and alleging a conspiracy on tbe part of tbe transferee of tbe note, tbe payee and others to cheat and defraud citizens generally, and that defendant, by tbe fraud practiced upon him, was induced to sign tbe note. Tbe answer avers that plaintiff bad notice of tbe fraud in procuring tbe note, and that it was given without consideration. It is also alleged that plaintiff’s transferrer bad notice of tbe fraud. Tbe answer is in tbe nature of a cross-bill, and tbe payee, Hunter, a former transferee, Leggett, with others, are made defendants. These parties, or at least plaintiff, Simon, and bis immediate transferrer, Leggett, answer tbe cross-bill, denying tbe matters therein alleged. Upon tbe issues thus formed, no objection having been made to tbe manner of their presentation and trial, tbe cause was submitted to a jury, and evidence in support and denial of tbe allegations of tbe pleadings was introduced. Among other instructions the court gave tbe jury tbe following: “ If you find from tbe evidence that tbe note in question was obtained of tbe makers by fraud and deception, and if you further find that tbe plaintiff, Simon, knew of such fraud and deception, or if be bad reason to know or believe that said note was fraudulently obtained of tbe maker, and that it is void, and if, because of such knowledge or belief, be refused to receive or purchase it of Leggett until an indemnifying bond was executed to him by Leggett, then tbe law of tbe case is with tbe defendant, and if you so 'find then your verdict should be for defendant.” And tbe instruction directed tbe jury that if plaintiff, “ in good faith, for a valuable consideration, obtained tbe note in tbe ordinary course of business, before maturity, without notice of fraud, or without having reason to know or believe that tbe note was obtained by fraud of tbe maker,” they should find for plaintiff. [539] These instructions are erroneous. They leave out of view the well-settled doctrine that if Leggett, the transferrer of plaintiff, was such an innocent and bona fide holder of the paper, that in his hands it could have been enforced against defendant, plaintiff, although he may have taken the note charged, with notice of its infirmities, may recover in this action. If Leggett so held the note, his title and rights thereto were such that they could not have been defeated by defendant. In the transfer, the title and rights held by him passed to plaintiff. The notice which plaintiff may have had of the fraud in the original transaction does not defeat the rights he acquired by the transfer. One reason of the rule is obvious. The maker of the note would be liable to the transferrer; his condition is made no harder by the note coming into the hands of one having notice of its infirmities.- We do not understand that there is any conflict in the authorities upon this point. Hoskell & Gervey v. Whitmore, 19 Me. 102; Smith v. Hiscock, 14 id. 449; Prentice & Messenger v. Zane, 2 Gratt. 262 ; Boyd v. McCann, 10 Md. 118 ; Howell v. Crane, 12 La. An. 126. See authorities cited in Story on Prom. Notes, § 191. The instructions above set out, being in conflict with this - doctrine, ought not to have been given. For this reason the judgment of the district court is Reversed.